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Matt Simmons on Fast Money (CNBC)
Posted by Prof. Goose on March 9, 2008 - 4:00pm
Matt Simmons was on Fast Money (on CNBC) Friday afternoon. Here's the clip.
“Considering the many productive uses of petroleum, burning it for fuel is like burning a Picasso for heat.”
—Big Oil Executive
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"We should never have let India and China grow" - Interesting statement to say the least. How does he propose limiting population growth on that scale?
You can't stop people from doin' the wild thang - he meant we shouldn't have exported our manufacturing and tech support jobs to those countries.
Oh, and here is even more fast money - an out of work or soon to be out of work tech support group from a dying hedge fund, apparently under the lead of some CIO type character, is now preparing to jump ship wholesale. Interesting proposition - "The market is melting down, who would like to try to start something in all of this?" Perhaps there is some value in knowing how such things are done and taking advantage of situations as things unwind? This was the case in the telecom business after the dotcom bust - if you knew what stuff was and its approximate value the market just threw money at you. I was well clear of the equipment broker business but I had three separate instances where I made in excess of $10k by taking a couple of phone calls and arranging things.
http://www.linkedin.com/answers/financial-markets/hedge-funds/MKT_HDG/18...
Interesting times, people, interesting times :-)
Clearly a joke on Simmon's part (and they laughed at it). He also probably had in mind economic growth rather than population growth.
The ballot box to vote on stopping Chinese and Indian growth is probably defense oriented. Its more Chinese though. Maybe they shouldn't have picked the Olympics. Anybody looking for excuses?
Simmons once said on an interview with Jim Puplava that we never should have invented satellite TV. I took the China/India comment in that vein. Namely, the problem is when the rest of the world wants to live the lifestyle of the Industrialized West. There simply aren't enough resources for everyone to live the consumerism lifestyle. Unfortunately, because of satellite TV, China and India want that life and are growing toward it.
For Christ sake he was being facetious. That should have been obvious to everyone but I guess a few just did not get the joke.
Ron Pattersson
That durned Matt Simmons is a riot. My favorite was when he proposed mowing the ocean floor with underwater lawnmowers:
On a more serious note, I heard the Chinese are doing a variation on the same joke. Shang Wu say: "We pull plug on American economy, and fatty Americans ride bus." Know what I mean, Ron?
OK JD, here's your chance to actually reply to my question of why you laugh at Simmons for suggesting we harvest algae or NH3, when you have an entry on your blog outlining how we can live on vat-grown meat.
Is it me or are the people sitting behind the table look like someone just slapped them in the face and in order to keep selling that have to keep smiling?
The jitters were rising in the Fast Money commentators - the nervous body language was subtle but undeniable.
Hehe yeah these guys lightbulbs are just starting to glimmer. Was fun to watch their discomfort. Simmons was just waltzing through with a SLEDGEHAMMER the good old lead to gold, 20c a cup, giving it away in the 20th century, running out of resources by 2050 - 2070 and associated 9 billion people.
Beautiful to watch this runaway train. Like the Hindenberg exploding or the tail of the Titanic getting swallowed by the atlantic.
Your concept of beauty is twisted. (smirk)
An old saying goes - if a wise man warns the sovereign three times and goes unheeded then it is best to retire.
1) Limits of growith 1972
2) Carters "Crisis of Confidence" Speech" 1979
3) ???
3) ASPO and The Oil Drum
It'll all be there to read in the Internet wayback machine (Assuming, of course, that we can keep the internet going.
Oh, they've been warned far more than three times. Admiral Rickover in the 1950s, Hubbert's work in the 1940s through the 1980s, plus many many more.
I loved watching their condescending smirks turn to deer-in-headlights frowns.
It's the little things that make me happy these days.
Hello TODers,
Very good video--I love how Matt Simmons easily creates, by his frank discussion, the stunned 'Oh Crap' look on the talking heads followed by their knee-jerk response of cracking light jokes to diffuse their obvious subconcious stress.
It also gives me an opportunity again to stress the postPeak importance of I-NPK & O-NPK [plus other trace minerals] to help ameliorate the decline. Human labor can substitute for some of the work done by our depleting FF-energy slaves, but there are NO SUBSTITUTES to NPK if we wish to optimize harvest yields.
Example: You could have 1,000 people laboring on a 100 acre farm. They could be hand-picking every weed the minute it pops out of the ground, and hand-injecting water hourly by syringe into each plant's root ball for optimal water usage efficiency. But if the soil has a Liebig Minimum--> these intensive hand efforts will basically amount to wasted time as the crop will mostly fail to germinate, or have drastically stunted growth, or fail to put out much edible fruit. You simply have to have optimal nutrients, soil microrganisms, water retaining mulch, and worms to give the best chance for the crops to thrive.
The big question is: will people Peak Outreach choose to change their mindsets and vital resource flow-systems; my speculative 60-75% of the US labor force intensely involved in human energy movement of
I/O-NPK and food flows?
Or, as Jay Hanson suggests: are we Thermo/Gene mired in frozen and obsolete belief systems until 60-75% [or more!] of us are slashing away at each other in huge machete' moshpits?
Sword of Tahoe, Lucifer's SledgeHUMMER, RAV4blood spears vs wheelbarrows and bicycles? Time will tell.
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
Simmons keeps talking about how cheap oil is, however I think he overestimates high oil can go before it's a huge problem. Fact is the world's economy has increased at the pace and scale it has, due to what I guess Simmons would refer to as super cheap oil, and if that commodity even stays at the lofty level it now trades at without increasing anymore, then we are all in for a long recession.
The only reason the UK continues to roll along with 9 dollar equivalent gas per gallon is that most people in Great Britain use public transit which goes everywhere. Where buses don't go, either subways or trains do. I lived in Aberdeen, Scotland and worked on the BP40's a set of 4 BP rigs a couple of hundred miles off shore in the North Sea. There was never any problem going anywhere in the year I spent there and I never rented a car or owned one. Even if you take a trip into the highlands, there are tour buses that have daily or weekly excursions. So those that can afford cars own them and those that can't don't.
But here in the US we don't have that option in many cases because public transit is very limited. America was conceived on the Urban sprawl plan and cars are a must, much to the chagrin of Kunstler. Plus if you drive anywhere in the UK it is a much shorter distance than here in the US.
So all these comparisons of what fuel costs in the UK, is for the most part irrelavent as compared to the US.
Hello,
I am a long-time reader at the Oil Drum but this is my first comment.
"The only reason the UK continues to roll along with 9 dollar equivalent gas per gallon is that most people in Great Britain use public transit which goes everywhere."
I see variations on the above a lot in peak oil discussions but I must question the truth of this statement. There is indeed a large bus and train system but it is hideously expensive to use unless you are a) retired (in Scotland at least) or b) at school. As someone who, until recently, only used public transport I can give concrete figures for the cost of using the bus. To travel from the village I live in to the nearest town cost £4.75 for a return ticket in 2006, in 2007 this cost was raised to £14.10. For myself, my wife and my 7 year old daughter to travel to Stirling and back now costs over £35 by bus. We realised that we couldn't afford this and so bought a cheap second-hand car that now costs £6 in petrol for the same trip. Even factoring in road tax, insurance etc. there is a huge saving especially as our small car gets around 45mpg.
People are abandoning buses in droves and trains are much more expensive than buses, I hardly know anyone that uses the bus nowadays.
There has been a lot of discussion regarding people leaving their car at home and using public transport but the one aspect that is rarely mentioned is the ever increasing cost of using buses, trams and trains. For public transport to be practical it must be subsidised but this is anathema to our current free-market obsessed govt.
All the best,
Fergie
Some stats in support of what you're saying.
- in 2000/1, Britons travelled (averages) 6,815 miles each in 1,109 trips of 6.7 miles.
- 80% of people live in a household with a car
- car travel is 80% of the total distance travelled
- During the 1990s, London bus trips increased by 25% while those outside London decreased 30%
- 25% of all trips are under 1 mile, and 80% of these are walked.
- for the 75% of trips over 1 mile, cars are the dominant mode of transport
These figures are quite comparable to the US and Australia.
Hmmmm - here in the dense Manchester-to-Leeds urban conurbation, I see the motorways chock-full of commuters every morning, driving 35 miles each way in their metal boxes. I'm one of them.
I've tried the public transport option, and it takes twice as long as driving, leaving me too knackered to stay awake in the evening. Also sitting in a packed railway carriage, surrounded by juvenile delinquents playing happy hardcore on their mobiles, ain't much fun.
Meanwhile I bought my most expensive-ever fill-up of diesel today 111.9 pence/litre, 20% more than a year ago. Even driving a low-value diesel car to minimise costs, it's beginning to hurt pretty bad. And I'm one of the lucky ones, I have a pretty decent job.
Not asking for sympathy - just letting you know the view from the ground here. I need to move nearer to work, or move work nearer to home.
Regards Chris
The impression I got from the video was that the panel was composed of cornucopians who were trying to be polite in not trashing Simmons to his face. I don't think there was a Peak Oiler in the bunch. Boone Pickens gets the same sort of treatment on CNBC, an eccentric who's having his moment in the sun.
CNBC generally thinks high oil prices are an aberration that will soon subside. Dennis Neal spouts that rhetoric daily, and Larry Kudlow says essentially the same.
I agree. You could cut the silence in that room as Simmons spoke with a dull butter knife. The denial of Global Warming comes from the same people that deny Peak Oil. I have an inlaw that thinks everything is rosey, just like Bush does. It's infuriating, but what can we do except wait for it to finally dawn on them.
Thanks for the alternative viewpoint as someone on the inside. I was there in 80-81 and not in an area as congested as you are, so maybe it was a different time or by just being there for a year was different than being there on a permanent basis.
Maybe you can explain to people on the boards here why fuel is so expensive in the UK. My memory is that its heavily taxed. After all, oil is a worldwide commodity that costs the same for any country importing it, right?
Correct, I believe, off the top of my head, tax is 70-80% of the cost. Hence in general we drive smaller cars shorter distances.
It is just on 70% tax at the moment. It is due to go up by 2p/litre (15.7cents/ US gallon) on April 1st. There are some people complaining and saying the increase should be put off but not that many and none of the main party leaders.
This puts a different light on the economics of gasoline/petrol in the U.K. and other places with high fuel taxes. Yes, it costs them more to drive, but that money is being cycled back into their lives and their economy through government services.
My own state of Vermont did a study on energy use a few years back that included this gem: If we paid the true cost of driving in a gallon of gas (instead of subsidizing road building, law enforcement, etc., indirectly through income tax) then it would cost an extra $3.20 a gallon.
The upshot is that we in the U.S. are effectively paying $6-$7 a gallon to drive, we just don't see it at the pump. We'd be a lot better off if we tagged that $3.20 on to a gallon and increased the personal income tax deduction to make up for it. We could spend the tax savings on gasoline or drive less (or more efficiently) and pocket it.
But of course that would hurt SUV sales. Never mind.
Interesting to hear how things are on your side of the pond. I live in Oceanside CA and they just opened a rail line that serves the Oceanside to Escondido (about 18 miles of line) and it was full the first week it opened and they are already talking about adding additional cars. Commuters who were either foreclosed upon in the areas that are "bedroom communities" to the east are relocating to the beach communities and downsizing. When you look at areas that have lost up to 30% of their value that put a large amount of homeowners in the negative. Abandoning the home to the banks is an option that a lot of commuters are taking here and then just moving to apartments closer to work. The prescription of homeownership being the savings plan for Americans is disintegrating.
It's amazing how fast people are adjusting to rapid economic shifts!
There were some other Matt Simmons interviews mentioned in yesterday's Drumbeat. It is possible they were mentioned earlier as well, and I missed them.
The interviews are on evworld.com, and in part discuss Simmons recent review of documents relating to Middle East oil. These are audio tapes, each about 25 minutes long, completed sometime in late February.
http://www.evworld.com/evworld_audio/mSimmons1_feb08.mp3
http://www.evworld.com/evworld_audio/mSimmons2_feb08.mp3
About two-thirds of the way thorough the first tape, he talks about various Saudi oil fields. He talks about Saudi Arabia using maximum reservoir contact wells, with automatic cut-off when the water cut exceeds 30%, and other new tools. In all of the fields he lists, they says they are "getting the last crumbs out". When they go, they will go fast.
In the second tape, around 60% of the way through, he talks about other fields in the Middle East. There also, he gives the impression that very aggressive techniques are being used to get oil out. Once these fail, oil production will drop quickly. He says that the time the decline will begin is not clear -- it could be 2 or 3 months, or it could be two years from now.
Matt talks about the possibility of 65 million barrels a day in 2013. I think he is talking about going from 74 to 65 in that time frame, rather than 85 to 65.
Thanks Gail. People still use tape to record on? How quaint! Makes me think of 1993, Clinton jogging around for his next Big Mac photo op with his SS goons. Cue up Nirvana.
Can someone explain how he gets to $378/Barrel from $9 per gallon gasoline (UK price is about $8 per US Gallon now with the falling US Dollar) Currently in NZ we pay equiv of $5.38 a gallon
Neven MacEwan
$9 times 42 gallons per barrel is $378/barrel. I'm not saying it is a valid, dollar devaluation corrected value. But it makes a good sound bite.
http://www.calculateme.com/Volume/Barrels(Petroleum)/ToLiters.htm
1 Barrel of Petroleum = 158.987294928 Liters
My purchase today £1.119 per litre = £177.90 per barrel
http://www.xe.com/ucc/convert.cgi
1.00 GBP = 2.01660 USD
177.90 x 2.02 = $359.4 dollars per barrel approx today.
So I think he's exaggerating a little, or using a dollar exchange rate that's a bit out of date (it was as low as 2.07 per GBP last Oct or thereabouts)
But not far wrong.
Regards Chris
JB
Thanks!, I realise now he was saying gasoline in the UK is $378 per barrel now! not that this equates to oil at $378 per barrel doh. Almost all of the US MSM stuff focuses on personal transport fuels where it would appear pricing is relatively inelastic (and I assume it would be for heating fuels) but what is the elasticity of other uses of crude oil? Bulk transport? air travel? Plastics? Will this determine the price or will it be government controls & subsidies which distort pricing because they require oil as an opiate of the masses (ie ME/ China).
Interesting times
Neven
42 gallons/barrel x $9/gallon = $378/barrel. This is actually a barrel of pure gasoline. 42 gallons of oil yields approx 20 gallons of gasoline. He's trying to make a point though.
Fuel is heavily taxed in the UK to pay for road infrastructure.
This appears to be the same video that was posted in Drum Beat yesterday where I took him on. Well, I'm going to try again.
When he compares $9.00 gas in England to $9.00 gas in the United States he is comparing apples and oranges. When things are not sufficiently alike, one can not make comparisons and validly predict anything. England and the U.S. are not sufficiently alike. $9.00 gas in England has to include at least $6.00 of tax. England does not send it's tax to Saudi Arabia or Russia or where ever. It is spent in England for the most part and supports the English economy with things like national health care and infrastructure development. This is true for other high tax countries but not for the U.S..
$9.00 gas in the U.S. under the current tax structure implies either or both unbelievable oil company profits or a near tripling of out flow from the economy to oil exporting countries in which case the effect on the American economy would be profound. Outflows of such a size would rapidly drop the dollar in an even steeper decline IMO. Oil companies, if their behavior did not change, would use the wind fall for mostly stock buybacks, dividends and drilling more dry holes in the ground along with increased executive bonuses all of which have proven to be very ineffective except for those receiving the largess. In short $9.00 gas would mean a severe depression in the U.S.. I fault Matt for not seeing such an outcome and using faulty reasoning.
His other assertion in the video that mining the Alberta oil sands are like turning gold into lead is a false analogy of the first order. Posts here have stated the EROEI, which in this case is a valid concept because we are comparing like with like (i.e. oil is going in and oil with similar characteristics is coming out) is in the order of 3 to 1. How is that sufficiently similar to turning gold into lead which we all (I hope) know is impossible. Matt should not make such assertions in public if he wants to increase the credibility of his Peak Oil arguments. They make him look like a nut, which I do not believe he is. He just gets carried away (I'm being generous).
I believe Matt was trying to "give leadership" with the $9 comparison, "Keep your end up folks, high oil prices don't have to stop the economy", numbers from an impromptu TV chat should always be regarded as "experimental public psychology" rather then engineering data. We pay approx $7 per US gallon in Australia and we are roaring along at the moment.
Perhaps Matt means "Gold to Lead" in the sense that it's "not going to save us".Which it is not given the constraints of climate change, did you not hear him mention destruction of a river in Canada already due to tar sand development.
The USA is broke, oil is wealth and you aint got any, readjust your lifestyle to that of a pauper, coz that's what you are now.You want to change your economy around, bring home all your troops from the lands you arrogantly occupy and stop driving around in cars. Doh!
Stop looking at the individual pixels and grab the whole picture of the challenge we face people.
Holistic is the word, contemplate holograms.
Lucifer
I think you'll find AU gas is about 5USD/US Gallon (based on $1.40 AU/litre, 0.95 ex rate & 3.75 litres per US Gallon).
Neven
Sorry, US Gallon is different to Imperial gallon correct.
x
2 counter points, firstly the $9 gas demonstrates a lack of price elasticity, The roads were just as congested and gas is much more expensive, I think MS knows that the cost to the US economy would be devastating, but then its not only the US that sets the price is it? Secondly the gold to lead comment I agree is not strictly accurate but he also mentions the environmental damage (which is not factored in and EROEI calcs) so the point he was trying to make (in a very short sound bite) was that it is not a panacea (and maybe a little hyperbole was called for)
Neven
"How is that sufficiently similar to turning gold into lead which we all (I hope) know is impossible."
Actually not only is it possible, it is done commercially
See here
This business about turning lead into gold is a reference to the philosopher's stone of medieval alchemy. Transmuting something from low value to high. Just to make sure we're on the same page - not getting that impression.
Turning gold into lead makes no sense, of course. Matt likely means the waste of NG for tar sands production here.
Nominally for road infrastructure - which is generally good-quality here - but really it's just balancing the books for the government.
Discretionary spending in the UK - particularly petrol, alcohol, cigarettes, etc - are heavily taxed,. and IMHO that's probably a sane and rational way to do it. I need to be encouraged to smoke / drink / drive less, for the good of myself and UK society.
I have no complaints about this strategy, it makes sense as far as I can see. However the general public is going to get pretty antsy about fuel prices real soon now - no doubt about it - because such a big portion of our disposable income is spent on petrol. And it's going up real fast. Better redouble my efforts to find a local job that's in Manchester city centre, it just makes so much sense for me.
Regards Chris
Here in India petrol costs the equivalent of $4.90/gallon (Rs.52/litre) or thereabouts depending on the US/Re conversion. Considering that the per capita income in India is USD1000 or Rs.40000 p.a. it is a huge price to pay. I must add that about 60-65% of this is in tax which hopefully goes to something more useful than adding CO2 to the environment.
In Bangalore (pop.6.5 million) where I live the high cost of petrol does not seem to make a penny's worth of difference to the traffic. During peak hours traffic moves at 12-13 kmph on the average (it use to be about 30 kmph 15 years back). Car ownership is about 450,000 and two-wheeler ownership is about 1.5 million.
Public transport comes in the form of about 100,000 3-wheelers (or autorickshaws as we call them)and 5000 Metropolitan transport (BMTC) buses. As per the website of the BMTC it ferries about 3 million passengers per day. It has improved services over the last 5-6 years, but is the transport of last resort (essentially those that can't afford private transport take it). Of late it has introduced air-con services to some of the IT districts and has had decent success.
A 36-40 km MRT system is in the pipeline and is expected to go online over 2010 and 2011. It should take about 1 million people off the roads. This is the only hope for Bangaloreans - this or Rs.100 petrol. Our urban planners (if you can call them that) are still fascinated by 6 and 8 lane roads, elevated expressways (we have a couple of them being built as I write) and flyovers.
This is true of most Indian cities except New Delhi. ND has an excellent MRT system in place. Bombay (now Mumbai) has always depended on its suburban rail system to carry almost 8 million people each day. Inspite of this, traffic crawls and it is not uncommon for a 20 km journey to take 2 hrs.
Hope that throws some light on what an Indian city looks like. Maybe Matt Simmons was right :)
Srivathsa
Hello S_yajaman,
Welcome and Thxs for the traffic reports from India. I hope you can contribute more in the future as a regular TOD poster. I would be especially interested in fertilizers, crops, and food reserves as you could provide corroboration to what I find on google news. For example: are sulphur and NPK shortages and prices really starting to hurt Indian agriculture, or is it just inaccurate media reporting?
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
Bob,
Thanks. I've been reading a lot at TOD, but have just started commenting. Let me check on yields for various crops as well as fertilizer inventory trends and get back to you. It ought to be possible to get this from government statistics. they are hopefully a bit more accurate than the intelligence on WMDs in Iraq.
Srivathsa
There are some factors to high taxation in Britain that many Americans don't get. They have NationalHealth. We pay for our own health if we even have any and for most of us it is catastrophic health care with deductibles that run into the thousands. They have massive social welfare. We have social security and Medicaire. What a joke! Both programs are criminally underfunded and daily drift towards complete insolvency. The U.S. central government has shifted social responsibility to the states. I lived in Nevada for a lot of years and they have such poor education and social services they call it the "Mississpi of the west". I lived in Central Louisiana in the 1981 when the state mental health budget was gutted. They emptied the State Mental hospital in Pineville by buying them all one-way tickets to California.
Americans are predisposed to resist taxation. We call it Communism.
I wonder where we got that idea?
If you figure about $0.20/gal increase in gasoline for every $10.00/barrel increase in the price of oil you come pretty close to $9.00 gal, depending on where you live.
$378.00 - $106.00 = $272/barrel = $5.44 increase to $3.60/gal on the Coasts.
What Matt Simmons and T. Boone Pickens are doing when they go on such shows is engaging the defenses of those with unjustifiably optimistic views (I prefer this description to the shorthand of cornucopian). Before there is any public acceptance of oil depletion, challengers of business as usual will be met with psychological defenses against the data being presented. This is part of the process. If, as we believe, the data will accumulate which points to depletion, the evidence will eventually break through the defenses of many, but not all of the most optimistic.
After listening to those linked Matt Simmons audio's; PO is about to get public bigtime and data or circumstance will arrive to verify it. He mentioned a time period of three months, my calender says by the end of April.
We need that, once WE accept our problem WE will be in a position to attempt to manage this resource responsibly.
I feel optimistic. Could someone please direct me to the most recent EIA IEA etc reports, haven't seen them here recently.
I missed Simmons saying it in quite this way:
http://www.meed.com/news/2008/02/matthew_simmons_calls_on_regional_oil_p...
Quite so, Matt mentioned that we could see big fields in ME going into terminal decline in as little as three months. Once that happens it will be impossible to "play the deceivers game" any longer.
My timeframe is based a very different modelling system altogether, and it's telling me by the end of April.
Simmons aside, the tale of the tape so to speak regarding Peak Oil will be crude extraction. The next quarterly report will be at the end of this month. I'm very curious to see if production is rising, remaining the same or dipping down. Anyone have any advance information?
Matt has some great one liners. But everything is backed with real facts. Here are some links to my favorites.
http://www.worldenergysource.com/newasf/wetv.cfm?vfile=Program_4_07_2007
http://www.worldenergysource.com/articles%2Fpdf%2Fsimmons_we_v10n2.pdf
Here is a whole section on Matt, regestration is free.
Forgot the link to the section
http://www.worldenergysource.com/hottopics/simmons/